Sparks Fly Over Utility Measure


The “Utility Modernization Act” (Measure K1) is on the Nov. 8 ballot. The single-ballot measure seeks approval of two unrelated utility issues. The first concerns collecting a tax, the second deals with transferring funds. This presents voters with a dilemma if they favor one but not the other.

As arguments emerge, supporters and opponents alike tend to focus on only one-half of the ballot measure. The “modernization” aspect of the measure pertains to updating the city’s definition of telephone service to include phone service arriving via the Internet and cell phone transmitters, technologies not contemplated when the current ordinance was drafted.

The city estimates it is losing about $1.5 million annually in utility tax revenue because not all cell and Internet phone providers are collecting the tax, which would go to the city. For instance, city officials say Verizon Wireless is not collecting the full tax. Thus, some users’ phone bills are artificially lower than others’ because of tax avoidance, providing a de facto corporate subsidy to certain phone service providers. 

The modernization also raises the age at which seniors can receive a partial exemption from the tax from 62 to 65 years of age, to account for a population that now works and lives longer.

Opponents question whether the existing utility tax should be expanded at all, claiming it affects vulnerable seniors who are trying to make ends meet. They also say the increased tax revenue could potentially trigger wage increases for all public safety employees, which remain even when the economy falters. Supporters, on the other hand, say it’s only fair that everyone pays the same tax for telephone service.

A legal challenge prompted the second aspect of the ballot measure — the transfer of funds. The city is currently facing a lawsuit that alleges the longstanding practice of annually transferring funds from the city-owned electric power company to the city’s General Fund is actually a “tax” not approved by the voters. The lawsuit contends that the funds should remain at Alameda Municipal Power for energy-related uses. By having voters approve the annual $3.7 million fund transfer both retroactively and into the future, the city hopes the lawsuit will become moot.

Of the total $3.7 million in annually transferred funds, $900,000 is used for street-light maintenance. The remaining $2.8 million goes into the General Fund, with no special earmarks on how it will be used.

Some residents worry the fund transfer will be used to underwrite the growing pension and benefit obligations the city owes its highly paid staff and public safety employees. They would rather see the measure fail, and have the money be spent on maintaining our utility infrastructure and on the utility’s ongoing need to adapt to the changing energy world. Others believe that because the city owns the utility company, it should rightly be able to tap into those funds for running the city.

Contrary to popular belief, if Measure K1 fails, the transfer of funds from the utility company to the city will not automatically end. Changing or ending the transfer would still require action by the city council. 

On the other hand, if voters provide a vote-of-confidence for the annual fund transfer, it could potentially frustrate future efforts at the city council level to alter the practice, such as lowering the transfer amount and/or earmarking the transferred funds for specific items.

Voters will have to make one decision on two unrelated issues. Whether those issues will need to return to the ballot box is yet to be seen.



Irene Dieter posts stories and photos about Alameda at